Time To Get TAN?

TAN (along with KWT) are the ETFs to hate these days. Both are focused on solar energy, and both have been going nowhere but down for years now.

But a contrarian investor might be wise to take another look. Because the solar bears protest too much.

The fact is that solar energy has always been political. Those who invest in oil, gas and coal have always hated renewables, with a deep political hate. But hate is an emotion, and emotion is the enemy of profit.

Fundamentals are finally coming into favor of renewables. Producers have dropped costs below those of grid energy in many places. The need for subsidies in order to spur demand is slowly declining. Google recently put another $75 million into an Iowa solar farm while Berkshire-Hathaway's Mid-American Energy unit is grabbing for solar assets with both hands because they can make money with them.

Thus anti-solar stories are taking a more angry, political, and less rational turn.

In Hawaii, for instance, solar energy costs much less than grid power, so subsidies can be reduced or even eliminated. Naturally, this is said to be bad news, with one consultant quoted as blaming subsidies for the state government's budget problems.

Here's another example. Sean Higgins, a former Investors Business Daily writer who never met a conservative cause he didn't like, compares the situation facing China's solar sector to "Solyndra" - that means scam in his book. (The government's track record on green subsidies is actually much better than any venture fund's track record.)

As solar costs drop below replacement for electricity, subsidies can be reduced, because sector growth becomes organic. Once solar becomes the cheap energy, supply starts creating its own demand. There will be adjustments to this, and there will be electrical industry pushback, because it will take new infrastructure to accept an abundance of cheap, albeit intermittent power.

But when the political start bleating about an industry's "failure," that's not a bearish signal. It's a bullish one. TAN has been building a base for six months and now sits at a higher level than it was at then. KWT is up more than 50% since November 23. Does that sound like failure?

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.